ServisFirst Bancshares, Inc. (NASDAQ:SFBS) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 05:15 pm ET

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ServisFirst Bancshares, Inc. (NASDAQ:SFBS) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Tyler Stafford with Stephens. Please go ahead.

Analyst
Tyler Stafford

Hey, good afternoon, guys.

Executive
William M. Foshee

Hi Tyler

Executive
Thomas Ashford Broughton

Hi Tyler, how are you doing?

Analyst
Tyler Stafford

Good, how are you guys?

Executive
Thomas Ashford Broughton

Super.

Analyst
Tyler Stafford

Good. Hey, maybe, Bud, let's start on the margin, so the 3 basis point to 4 basis point increase and you said the different components that you could email us, could we just walk through that on the line here and how you expect to get that 3 basis point to 4 basis point increase in margin, particularly given fourth quarter that's usually a seasonally high liquidity build and I appreciate the commentary on the deposit costs. But if you could just go over that, I think you said a 1.32% interest bearing cost for October is what you expect. So a pretty sizable step down, did I hear that correctly?

Executive
William M. Foshee

Right. That's interest bearing DDAs does not include CDs. But yeah, a big decrease. It was 1.49% in September, then after all the rate cuts, we're estimating 1.32% in October.

I mean, you've got, let's see, you've got prime loans that reprice immediate, it's about $1.35 billion prime loans that reset once a month. That's $488 million excess, we're get -- our excess funds have decreased so far in October, so that definitely has a positive impact on earnings, Fed funds purchase, of course, we lower that rate, when Fed cut rates in September.

Don't know how much detail you guys want for reach component and so what current, when the loans reset, becasue you have to really go through like on the prime loans that reset once a month or 30-day LIBOR kind of going through when those would reset in October and then calculating that impact on the margin.

Analyst
Tyler Stafford

Right. But if we do get an October cut, you would still expect that basis-point improvement for the fourth quarter?

Executive
William M. Foshee

Yeah, because like when we have our ALCO meeting on Wednesday, we'll have a plan to cut rates even with or without a Fed rate cut, just something we've got to address. Like Tom said, we really didn't cut enough back in July, and we did a much deeper cut in September, after the Fed cut on the 18th.

Analyst
Tyler Stafford

Okay.

Executive
William M. Foshee

I mean, excess funds is really the key, I mean it's, that is decreasing. And that's kind of what's -- when it goes up $269 million in the third quarter, we didn't forecast that. That has a big impact on your margin.

Analyst
Tyler Stafford

Right. But isn't seasonally fourth quarter pretty high from a liquidity standpoint if I go back the last several years? Would you expect something different for this year?

Executive
William M. Foshee

Well, I guess what we would anticipate probably is higher loan growth. I mean, I think that's traditionally how and that's -- if you look at where we are from a budget standpoint, we're well behind the loan. So I think, we'll have a stronger fourth